Federal Reserve Board Gov. Elizabeth Duke on Wednesday warned that a full restoration of credit growth is likely years away.

Duke said while the nation's recovery period is still early in the process, "the return of credit to pre-recession levels has lagged that of all other cycles of the past 40 years with the exception of the 1990-91 recession."

That recession, she explained, also experienced a banking crisis that was followed by "significant regulatory change," which mirrors what is happening today. Duke, delivering remarks before a banking conference in Columbus, Ohio, outlined how long it took for credit to recover for particular loans.

According to Duke, after the 1990-91 recession, it took three years for consumer credit to return, four-and-a-half for home mortgages, just over five years for nonfinancial business credit, and almost nine years for commercial real estate.

Comparing trends and information, Duke noted that supply and demand for credit will rely on the condition of the banking system, the changing regulatory landscape and the financial health of businesses and consumers.

Other factors contributing to lackluster credit demand and reductions include consumers opting to save more, while some businesses continue to face weak sales, according to Duke.

"Bearing this in mind, we will continue to study and assess the impact of the various factors at work in determining the total level of credit outstanding," Duke said.

On a more positive note, Duke told bankers that improved economic forecasts have led to fewer lenders tightening loan standards. "And business spending for equipment and software continues to improve, which should ultimately lead to more demand for bank credit," she added.

Still, despite "unprecedented" moves taken by the Fed to ensure credit flow remains and despite improved economic conditions, credit is continuing to contract.

The interest-rate-setting Federal Open Market Committee, at its latest meeting, said even though household spending is increasing, it's still being "constrained by high unemployment, modest income growth, lower housing wealth and tight credit."

Duke, in her remarks, rejected the notion that credit levels are continuing to decline because banks refuse to lend, saying banks must lend to receive profits.

"A bank that does not want to lend is like an airline that prefers to keep all its planes on the ground," Duke said. She added that those in the sector and policymakers must look deeper to find the cause and hopefully craft adequate solutions. But the results are likely to be complex and will take time to sort through, the official noted.

Duke also explained that Fed policies meant to facilitate better access to credit target "creditworthy borrowers."

"In no way do we want to return to the world where people could buy a house with no money down and no documentation," she said.

On businesses, Duke said data indicates "underlying borrower demand is much harder to find for small businesses than it is for consumers."

Many small business rely on commercial real estate values as a source of capital or collateral for other loans, Duke said, pointing out that CRE values slipped almost 40% during the downturn.

In trying to thwart any additional financial hardships on the nation's businesses and consumers, Duke reiterated, there is no single solution.

"Just as the causes for the decline in lending are multifaceted and complex and took time to evolve, the solutions will likely be equally difficult and will take time to fully work," the Fed official said.

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